Mandatory scam code may impose ‘unintended burdens’ on business, BDO warns
The government should consider opportunities for minimising potential reporting burdens for business in the design of mandatory industry codes for scam activity, the accounting firm says.
BDO’s forensic services experts have welcomed new mandatory industry codes for addressing scams and have highlighted the need for the framework to flexible and responsive.
The government released consultation late last year outline a proposed Scams Code Framework that would outline the responsibilities of the private sector in relation to scam activity.
The accounting firm warned that companies may face increased regulatory compliance requirements and longer investigation times for determining scam-related claims under the new codes.
This may lead to additional administrative and financial burdens and potential challenges in resolving claims, it stated in a recent submission.
BDO said the final structure of the framework needs to consider the potential impacts of any unforeseen regulatory burden on business and will require ongoing feedback mechanisms to be put in place.
“It will also need to consider any impact the operation of the framework has on services delivered to the consumer and the risk that the regulatory impost outweighs the benefits,” BDO’s forensic experts said.
“For example, where the service provided to the user is disrupted to a greater extent than the threat of the potential scam. This may require ongoing calibration of the framework – in particular, the sector-specific codes and standards - as it is implemented, as well as a formal evaluation post-implementation.”
The submission warned that the new framework may create increased burden on reimbursement for businesses.
“As seen in the UK, under the Payment System Regulator (PSR) new APP-fraud requirements, the introduction of a new scam definition may lead to challenges in determining who to reimburse for scam-related losses, especially for large entities, creating a burden in identifying and compensating victims, as well as potential abuse of the reimbursement system by scammers and fraudsters,” it said.
The introduction of new scam definitions and reimbursement models may also have unintended consequences on financial inclusion.
Where definitions or reimbursement models are complex or not easily understood by culturally and linguistically diverse groups, BDO warned this may affect vulnerable customers and their access to financial services.
“Companies may also face increased regulatory compliance requirements and longer investigation times for determining scam-related claims, leading to additional administrative and financial burdens and potential challenges in resolving claims,” it said.
BDO said there may be opportunities to minimise reporting burdens for businesses, however, such as a centralised reporting mechanism.
“Like the national cyber security hub, there may be efficiencies gained through establishing a centralised reporting mechanism where all stakeholders can share scam intelligence, incident data, and relevant information with a single responsible entity,” it said.
The submission said the government could also explore the use of secure information sharing platforms or databases where businesses can input data once, and authorised entities can access the information as needed.
“This information can be used for developing standardised reporting formats and protocols that are accepted by multiple entities to ensure consistency and facilitate the sharing of information without the need for businesses to tailor reports for different recipients,” it said.
BDO also said the development of interoperable systems that allow businesses to share information seamlessly across different platforms used by regulators, industry bodies, and other relevant entities could also help make the operation of the new framework more efficient.
It also recommended collaborative industry initiatives where businesses within the same sector collaborate to share relevant scam intelligence and incident data.
“This collective approach can reduce the individual reporting burden on businesses while ensuring comprehensive information sharing,” it said.
Businesses also need clearly defined protocols for reporting cross-sector scam activities, it said.
“Businesses may encounter situations where scams span multiple industries, and having established procedures for cross-sectoral reporting can simplify the process for involved entities,” the submission said.
Leveraging technology, such as automated reporting tools and systems, will also streamline the reporting process, according to BDO.
“Automated reporting can help businesses submit required information efficiently, reducing manual efforts and minimising the reporting burden,” it said.
